Comparison between a developing and developed country

Comparison mingled with a development and develop countryThe countries I choose to discuss be China representing the developing country and USA symbolizing the developed country.economic validation concerns with the work structure of a country. It overly includes how to allocate the economic inputs, how to distribute the outputs between the citizens and how to consume goods and services in an saving.(NA 2007)According to Gregory et al (2003), the economic system has four dimensions decision-making structure, coordination mechanism, productive office sort outs and incentive system.Decision making have-to doe with with by whom the decisions be carried out, industrial councils, the chairwomanial term, or private giveers. In US, excluding scarce a few national industries, many decisions are decided by the private owners, however, in China, there are a lot of put up-owned enterprises which murder decisions under the influence of the authorities.Coordination mechanism is the way of obtaining information and how to use it to coordinate economic activity. The of import forms of coordination contain planning and the food market. In US, its coordination form is the market the market is clear, and the exchange of information is highly efficient. While, China has been through a long time of planning coordination, its form, although its government claims the market, is in an interim.Productive property rights is about who takes control of the output. In US, the ownership is protected by the constitution while in China, they are owned by the public or by all the members in the society.Incentive system refers to the reward. There are two major musical theme material (compensation) and moral (social prestige). In both countries, they have both incentive systems simultaneously since either one is enough.1.2 pecuniary system1.2.1 monetary system in USIn the US, its building block of money is dollar. Its rally bank is federal semiofficialeral Reserve wh o is responsible for making decision concerning to the finance such(prenominal) as pecuniary policy and the base interest stride. since feed is independent of the government and its chairman has a margin of 18 years, it may put focus in the long term. In US, there are many monetary institutions such as banks, indemnity companies, mutual funds, insurance companies and so on. The varied institutions de fall guyed many sorts of financial instruments circulating in the financial market in the US which pay the US the most efficient financial market in the world.1.2.2 financial system in ChinaIn China, its unit of money is yuan. Its central bank is Peoples bank of China(PBC). Compared to Fed, they have a same production line including put out currency, making financial policy and so on. However, since PBC is as well a small-armitioning of the government, its independence is in doubt in just about degree. In separate words, PBC may adopt the government leaders opinions when they begin their concluding decision. Chinese financial system is immature and ease in the progress of developing. In this way, the kinds of financial institutions in China are limited. There are no private-owned financial institutions in China and theres legal shelter that financial institutions base just be emerged but no bankruptcy. The financial instruments are in addition limited. Time deposit, demand deposit, and treasury bills are individual investors primary choice. Until now, more and more people are taking part in the origination market or buying some fund.1.3 the unique feature-means used by the central to perplex the economyIn China, when PBC wants to express its monetary policy, its briny tool is to change the benchmark of deposit and lending rates. If PBC wants to adopt tighten monetary policy, it testament extend the benchmark rate, on the former(a)wise hand, it testament drop the rate when adopting expansionary monetary policy. However, the method has its own disadvantage its tack is so strong that it may hurt the development of the economy.In the US, when Fed wants to regulate the economy, its first option is hand market operation. If they want to adopt an expansionary monetary policy, it will buy the treasury bills from the financial market and emerge more money in the circulation. While, when they want to tighten the market, it will grass its bills and get money in the circulation corroborate to the Fed. By regulation this way, the Fed is able to regulate the economy more proficiently and accurately, and this method has the smallest damaging effects to the economy.The main reason why China doesnt use open market operation very much is that its financial instruments are limited and its financial market is not mature enough to do it. The other reason is that Chinese government interferes with the central bank more compared to the US government to the Fed.Q22.1 A brief introduction to IMFIMF, short for International pecuni ary Fund, is the international organization aimed for supervising the spheric system, especially financial system. Its main targets are keeping an eye on exchange rates and relief of payments as well as aiding the developing countries financially and technically. (Wikipedia)This organization was conceived back to July 1944 when 45 governments held a meeting in the Mount Washington Hotel find in Bretton woodwind in this way, this financial system later was called Bretton Woods system. It was formally founded on December 27,1945.2.2 Members of IMFAt the puzzlening of its foundation, it had only 29 members and its influence on the global financial system was rather limited. However, as time goes by, its affect on the global finance even economy is increase gradually the members it accumulated is more and more.It is not that easily be accepted as a member of IMF. The country or state has to take several strict steps before it is able to sign the IMFs Articles of Agreement. However, that effort is worth endeavoring all(prenominal) member has its own quota in it. The quota represents the post of the member in the organization since several crucial characteristics including the voting lading and allocation of SDRs are determined by the quota.The member who has the most quota in IMF has the greatest power in IMF. United States enjoys 15.82% while other members only get around 6%, or even less. In this way, the US has always been the country which is able to block a supermajority on its own. This is also the point raised by many critics that how can IMF keep its virtue among so many members.2.3 the objectives of IMFThe fundamental task for the IMF stays the same as it was founded to supply financial aid to the countries in need.2.4 challenges faced by IMFThe financial crisis beginning in 2008 is so devastating that nearly any part of the world is strictly affected by it. IMF is also no exception. This crisis is also showing the world that globalization, if no t controlled properly, may turn to be a disaster throughout the world and some international financial organizations, such as IMF, has to face some fresh challenges.According to the statement of an official in IMF, although the global economy would hit the second bottom since 2008, the self-colored world still has to face four crucial challenges the financial sustainability, practice session crisis, repair of the financial organizations and global cooperation.2.4.1 financial sustainabilityFinancial sustainability can be represented as a mutual trust between the government and its citizens on the policy. In this way, it is very critical when government is making policies in the recovery. To explicate it, lets make an example. When suffered from the crisis just now, the countrys economy was destroyed nearly completely. In order to recover quickly, the government chooses the expansionary fiscal policy by increasing the government spending or decreasing the inflation rate. By doing th is, the government wants to show the confidence that they want to encourage more investment to the citizens. The citizens, responding to the government, begin to invest more than before, since they have a faith in government. However, with the increase of investment, the government realizes that another problem is showing up the inflation rate is rising. In order to overcome inflation, the government has to increase the interest rate, which is a signal of scotch the investment. The citizens may feel confused by the governments changing policy, and may lose faith in it. If the trust between a government and its citizens is destroyed, the recovery is totally hopeless. However, usually the government is shortsighted and its omit of financial sustainability cannot help the recovery and even lose the best opportunity, it is the IMFs obligation to help guiding the government and make sure that they make the right decision.2.4.2 employment crisisSince the financial crisis in 2008, many developed countries including USA and some major European countries are pitiable from the extraordinarily high unemployment rate. Mr. Obama, the president of United States, had promised that the unemployment rate of US would drop. However, until right now, the unemployment rate of US is still above 8%, and there is more rumor that this number will fly to 10% or higher. This phenomenal is very common among the other developed countries around the world. High employment is fatal to a countrys stability. Without a domestic stable economy, how can people around the world make sure of the stability of the economy? While creating a stable environment for the global economy is one of the objects of IMF, how to lower the unemployment and create more job opportunities become their challenges.2.4.3 repair of the financial organizationsAs it is well known around the world, five major investment banks disappeared in USA during the financial crisis. affected by this, many other financial and nonfinancial organizations within and away US were in danger of bankruptcy. Since financial organizations are the primary elements in the financial system, helping them repair from the crisis is necessary. However, despite the organizations, even some countries are facing bankruptcy themselves. Depending on the government may not be a very good choice. In this time, the job rests on the bring up of IMF, an international financial organization, who is able to help national ones when they need it.2.4.4 global cooperationWith the pace of globalization, the cooperation within different countries is becoming more and more indispensible to ones own economy. The deadly financial crisis happened in 2008 was first ignited in the US, while, afterwards a short time, this crisis was spreading around the whole world handle a cancer. Until now, many parts of world are still suffering from it. From this crisis, it is widely realized that even it is caused by only one variance of a country, th e influence may be spreading far far way, just like the butterfly effect. Thus, in order to cope with it efficiently, every country should enhance their cooperation with each. To cooperate finely, there has to be an organization to regulate their behaviors and that organization is IMF. Now, how to help each member cooperation with others effectively and safely is the final but not the easiest challenge faced by IMF.2.5 my suggestionsWhen facing these new challenges, I have several suggestions for the IMF.First of all, I suggest that IMF should come about those countries who have the most serious debt problems, even by exempting from a certain(prenominal) amount of heavy debt. Only by doing this can help them steady the domestic environment within the countries.Another suggestion from me is that IMF should appeal that every member enhances its cooperation when making policies. We must abandon the way of recovery establish on hurting the other members economy such as the protection to local product by putting more duty on the imports.NA (2007). economic systems, The New Encyclopedia Britannica, V. 4, p. 357.Gregory et al(2003). Comparing Economic Systems in the Twenty-First Century.